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New Zealand Fleet Market Conditions for CY-2016

Following a record sales year in 2015, vehicle sales in New Zealand continue to be strong for both the retail and commercial markets during the first two months of 2016. The key factors stimulating this demand are steady growth in the national economy, a strong car rental market driven by a vibrant tourism industry, and an ongoing influx of immigrants into the country who require transportation.

In CY-2015, commercial-vehicle sales were at a record volume of 39,077 units, up 6.6% over the preceding year. Total CY-2015 new-vehicle registrations (combined retail and fleet) were a record 134,041 units, an increase of 5.4%.

The commercial fleet sales trend is continuing into 2016-CY. In February 2016, New Zealand light commercial vehicle (LCV) sales hit another record of 3,121 units sold that month, an increase of 10.6%, The top three selling LCV models were the Ford Ranger, Toyota Hilux, and Mitsubishi Triton.

According to the Motor Industry Association of New Zealand (Inc.), the SUV medium segment, along with the pickup/chassis cab 4x4 segments, had a 13% market share in February 2016, followed by small passenger cars with a 12% market share.

In addition, new-vehicle registrations in New Zealand are supplemented by large numbers of used-vehicle imports, predominantly from Japan. According to the 2016 Manheim Used Vehicle Report, annual used-vehicle sales in New Zealand are estimated to be 110,000 units.

Fleet Market Profile

In comparison to neighboring Australia, the fleet market in New Zealand is relatively small due to a population of only 4.5 million people.

Regardless of size, New Zealand is a mature fleet market with more than 90% of businesses classified as small and medium enterprises. The average fleet size in New Zealand ranges from 20 to 30 vehicles, with vehicles operated on both the North and South islands. The majority of units are domiciled on the more populous North Island. The key vocational markets (fit for purpose) in New Zealand are construction (trucks and LCVs), forestry industries, and dairy. Other key fleet buyers in New Zealand are multinationals and the government.

Company ownership is prominent in the traditionally conservative New Zealand market; however, leasing is becoming increasingly popular with businesses with an international ownership model.

Current vehicle depreciation trends in New Zealand see the large car segment continuing to contract.

As with Australia, sales in the SUV segment in New Zealand are strong. There is a buying trend to downsize to smaller displacement engines, going from six- to four-cylinders, and a segment shift to more compact SUVs.

Fleet order-to-delivery times for new-vehicle orders range from one to three months, depending on the model.

Macroeconomic Trends

New Zealand is an export-driven economy with exports accounting for about 30% of its gross domestic product (GDP).

Similar to Australia, the economic fortunes of New Zealand are intertwined with China, which is the country’s biggest export market. One economic segment in New Zealand currently being challenged by the economic slowdown in China is the dairy industry. The New Zealand dairy industry is huge, exporting 95% of its product and it accounts for 30% of the total dairy market globally. Dairy product exports to China are more than US$4 billion annually.

The largest segment of the New Zealand daily industry is comprised of a large co-operative called Fonterra, representing approximately 13,000 farmers, which annually acquires a substantial quantity of fleet vehicles. Fonterra is New Zealand’s biggest company — by revenue — and its largest exporter.

Other major New Zealand exports to China are US$1.8 billion annually in wood products and nearly US$900 million in meat products.

Despite economic headwinds from its export markets, the New Zealand GDP is forecast to grow 2.6% due to the ongoing low fuel prices, a steady national employment rate, a surge in international tourism, and an uptick in the construction industry, especially in Christchurch, which is still rebuilding from a devastating 6.3 magnitude earthquake in 2011.

Market Trends

Many upfitters are operating at capacity, necessitating fleets be extra attentive to specifications because any engineering change will even further delay OTD. It is times like today that reinforces the value of advance planning and the creation of fleet metrics to measure progress.

Procurement underperforms in cross-collaboration initiatives with other corporate spend categories, such as Environment, Health & Safety (EHS) and supply-chain management. A key collaboration opportunity is in the area of fleet safety.

We all agree that planning is crucial to the success of any project, but it is especially important when spec’ing a new upfit. Conceptually, most fleet managers will agree with this statement, but it isn’t always followed in actual practice.

A fleet cost reduction program goes straight to the corporate bottom line. If a company operates at a 10% annual net profit margin, reducing annual fleet expenses by $100,000 is the equivalent of generating $1 million in sales. Although fleet managers manage hundreds of thousands to tens of millions of dollars in corporate assets, only half are incentivized to achieve targeted performance goals. I advocate incentivization should be a universal best practice extended to all fleet managers.

I believe volume penetration of fleets by autonomous vehicles will take much longer to occur than what is predicted in today’s optimistic forecasts. Conceptually, autonomous vehicles are technologically feasible, but, as they say, the devil is in the details. One thing is certain, as we trail blaze new ground, so too will we trail blaze new problems.

Corporate mobility management to evolve into multi-level responsibilities for asset lifecycle management, administration of multi-modal mobility services, and deployment of productivity and safety tools to support a mobile workforce in the field.

The key objective of end-user discussions is to match the truck with the fleet application. Once you have completed your discussions, make sure the completed upfit specs have been reviewed and approved by all parties prior to order placement. It is critical to have a documented sign-off to avoid misunderstandings that result in after-the-fact upfitting modifications.

Recently, I conducted a survey of several hundred fleet managers to identify emerging industry trends. One recurrent theme expressed by fleet managers was the concern that fleet costs are starting to experience upward pricing pressures. Here's what they told me.

A growing number of employees are using their company vehicles as a tool to generate supplemental personal income for themselves. Unscrupulous service technicians are known to use company vans to moonlight for their personal business. Fleet managers must be vigilant about the unauthorized use of corporate assets and aggressively implement preventive measures.

Over the years, I have known many competent fleet managers. But, like salmons swimming upstream, not every promising fleet manager survives the challenges and rigors of day-to-day fleet management. It is understandable when fleet managers are fired for making expensive mistakes or when caught engaging in ethical transgressions, but, sadly, many more are terminated for circumstances that are entirely avoidable.

Although fleet management is a relatively new career segment, changes are percolating that threaten to transform it from a career path to a corporate stepping stone. The confluence of three fleet megatrends will be the catalyst fueling this transition.

Vehicle specifications should be defined by the fleet application and mission requirements. A truism in truck fleet management is to design a truck that will accommodate your operational requirements rather than trying to make your operation conform to the truck. Here's how you do it.

The South American fleet market has tremendous potential that will grow in tandem with the forecast of the region’s retail automotive market growing significantly by 2025, becoming one of the top three growth markets globally for light-vehicle sales.

At a fundamental level, the fleet management industry is an aggregator of data upon which it executes actions designed to optimize vehicle asset lifecycle – from acquisition to disposal – and to fine-tune operational efficiencies to maximize employee productivity. A cognitive computing platform, such as IBM Watson, would thrive in this type of data-rich environment.

Can a branded vocational vehicle be ticketed for being parked in an employee driver’s home driveway? Or, can it be subject to a fine if legally parked overnight on the side of a street? Before you say no, think again. These discriminatory practices occur regularly when vocational vehicles are parked in residential areas governed by a homeowner association (HOA). In fact, the type of restrictions implemented against vocational or branded vehicles can run the gamut and are at the whim of the HOA.